CHAPTER 7 APPRAISALS TABLE OF CONTENTS

Transcription

1 CHAPTER 7 APPRAISALS TABLE OF CONTENTS APPRAISAL POLICIES AND GENERAL REQUIREMENTS General Overview Definition of Market Value Necessity for Appraisal Appraisal Report Not Required Uniform Relocation Assistance and Acquisition Policies Acts Standards Appraiser Qualifications Jurisdictional Exception Separation of Appraisal and Acquisition Functions Prerequisites for Preliminary Right of Way Dual Report Requirements Donations Credit Toward State s Matching Share Dedications Notice of Decision to Appraise Parcel Diary Responsibility for Providing RAP Information Legal Opinions Responsibility for Preparation Appraisal Review Cumulative Review Concept Review Appraiser Concept Review Appraiser Process Minor Deficiencies Major Deficiencies Approval Authority Criteria for Use of Independent Fee Appraisers Report Processing and Records Memo of Transmittal Tables APPRAISAL REPORTS Federal Project Numbers Report Identification Numbers Organization, Content, and Sequence Parcel Numbering Number of Parcels Per Report Parcels Straddling an Expenditure Authorization Parcel Groups - Mutual Owners Parcel Groups - Integrated Operation Dual Report Process Corrections and Revisions Review Process (REV 8/2015)

2 APPRAISAL REPORTS (Continued) Replacement Housing Valuation Reports Calculations Noncomplex Valuations of $25,000 or Less Waiver Valuation In Lieu of an Appraisal Waiver Valuation ($2,500 or Less) - Contents and Requirements Waiver Valuation ($2,501 to $10,000) - Contents and Requirements Nominal Values ($2,500 or Less) APPRAISAL PREPARATION The Appraisal Summary - Purpose Appraisal Summary Format Alternate Appraisals Appraisals of Excess Property for Acquisition Uneconomic in the Market Uneconomic to the Owner, or for the Convenience of the Owner To Avoid Large Windfall Relocation Payments to Single Family Owner-Occupants Legal Larger Parcel and Subparcels Allocation Between Excess and Right of Way Excess Parcel Inventory Value (VTA) Rental Rates VALUE CONCEPTS AND CONSIDERATIONS Value Basis Total Value Encumbered Fee Mineral, Water, Oil and Gas Rights Improvement Bonds and Assessments Leasehold Interests Bonus Values Change in Grade Only Access Rights Temporary Easements Permanent Easements Unit Values Hazardous Waste and Hazardous Material Definition Hazardous Waste General Certification R/W HW/Materials Coordinators Activities Hazardous Materials HW Site Identification Notification Valuation Market Value of Nonprofit, Special Use Properties (REV 8/2015)

3 METHODS OF VALUATION Value Approaches Sales Comparison Approach Comparable Data Analysis of Comparable Data Assessor s Office Data Cost Approach Income Approach Income Schedule Review of Owner s Claimed Out-of-Pocket Expenses LAND General Timber Land Agricultural Land Valuation of Williamson Act or Farmland Security Zone Lands and Timberland Production Zone Land Valuation of Land Encumbered by Conservation Easement Open-Space Easements Wildlife Conservation Easements Agricultural Conservation Easements Replacement Conservation Easements Comparison of Statutes Regarding Valuation of Conservation Easements Outdoor Advertising Sites IMPROVEMENTS General Single Family Residence and Two to Four Unit Multi-Residence - Form Appraisal Miscellaneous Improvements and Landscaping Agricultural Improvements Valuation of Fences Valuation of Water Sources Improvements - Little or No Value Improvements - Interim Value Improvements - Purchase or Curative Work? Improvement Relocations or Replacements Exceeding Depreciated Value Less Salvage Relocation, Rearrangement, or Reconstruction Estimates Building Check Sheets Service Station, Commercial and Industrial Buildings Tenant or Lessee-Owned Improvements (Excluding Personal Property) Retention Value IMPROVEMENTS PERTAINING TO THE REALTY General Appraisal Page Format Replacement Cost Depreciated Value Salvage Value Improvements Not Pertaining to Realty Under Section (REV 8/2015)

4 DAMAGES, BENEFITS, AND CONSTRUCTION CONTRACT WORK General Severance Damages Noncompensable Damages Cost to Cure Benefits Summary of Severance Damages and Benefits Damage Alternatives Utility Service Damage Construction Contract Work Utility Main Relocations Private Utility Connections Access Openings REVISION AND REVIEWS General Changes in Unapproved Appraisals Requiring Division Approval Changes in Approved Appraisals-Unacquired Parcels Revised Appraisal Pages Submittal of Revised Pages Revised Parcel Appraisals Memorandum of Adjustment Changes in Approved Appraisals on Acquired Parcels Parcel Splits and Mergers Parcel Cancellations Review of Condemnation Parcels Report Analysis for Nondelegated Parcels OUTDOOR ADVERTISING SIGNS Valuation Definitions Process Payment Schedules/Application Renewal Permit Fees Appraisal Procedures for Outdoor Advertising Signs MOBILE HOMES Mobile Homes - General Mobile Homes - Realty Mobile Homes - Personalty Mobile Homes - Special Procedures Mobile Homes - Format (REV 8/2015)

5 SPECIAL APPRAISAL REPORTS General Material Site Appraisals Disposal Site Appraisals Office and Maintenance Station Site Appraisals Joint Acquisition Appraisals Protection Appraisals Appraisals for Other Agencies Staff Litigation Reports UTILITY, RAILROAD AND GOVERNMENTAL OWNERSHIPS Public Utility Property Fee Land Improvements Railroad Property General Prerequisites Valuation of Railroad Properties Governmental, Indian, Functionally Replaced Publicly Owned Facilities, and State Land EXCESS LAND APPRAISALS General Excess Land Methods of Disposal Excess Land Valuations Review and Approval of Excess Land Appraisals and Public Sale Estimates Market Value Appraisals Format, Content, and Standards Dual Report Requirements Market Value Determination of $10,000 or Less Format, Content, and Standards Public Sale Estimates Format Content Examples of Supporting Data Review of Request for Proposal Submittals (RFP) AIRSPACE ESTIMATES, BID LEASE VALUATIONS AND APPRAISALS General Estimates Appraisals - General Format Standards and Methods Preparation Bid Lease Valuations Rental Rate Appraisals (REV 8/2015)

6 RENT DETERMINATION General Content Review and Approval Process Special Circumstances Nominal Value Nonresidential Rentals BUSINESS GOODWILL APPRAISALS Statute - Compensation for Loss of Goodwill Interpretation of the Eminent Domain Law, Court Cases, and Legal Issues Burden of Proof Notification Letter to the Business Owner (Form RW 7-30) Timing for the Preparation and Completion of the Goodwill Appraisal The Goodwill Appraisal Report Parcel Diary Cross-referencing the Goodwill and Real Estate Appraisal Reports Parcel Numbering Review and Approval Process Project Influence Appraisal Report Components and Sequence Goodwill Valuation Business Valuation Methods Analyzing Financial Statements and State Income Tax Returns Betterment at the Relocation Property Disadvantages at the Relocation Property Compensation to Business Owners Under the Relocation Assistance Program (Pursuant to Section 7262 of the Government Code and 49 Code of Federal Regulation Part 24) (REV 8/2015)

7 APPRAISALS APPRAISAL POLICIES AND GENERAL REQUIREMENTS General Overview Article I, Section 19 of California Constitution states Private property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner Definition of Market Value The measure of just compensation is market value. Section of the Code of Civil Procedure defines market value as: (a) The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available. (b) The fair market value of property taken for which there is no relevant, comparable market is its value on the date of valuation as determined by any method of valuation that is just and equitable. A just and equitable method of determining the value of nonprofit, special use property as defined, for which there is no relevant, comparable market is: The cost of purchasing land and the reasonable cost of making it suitable for the conduct of the same nonprofit, special use, together with the cost of constructing similar improvements. This method of valuation pertains only to those properties where all of the following apply: 1. Operated for a special nonprofit use such as a school, church, cemetery, hospital or a similar property. 2. Tax-exempt. 3. Not owned by a public entity. 4. There is no relevant, comparable market. See Section for further details Necessity for Appraisal An appraisal is necessary to ensure compliance with the Constitution in arriving at a conclusion of just compensation. The basic document in all appraisals is the Appraisal Report. It contains the appraiser s estimate of fair market value and all data and narrative necessary to support the appraiser s conclusions (REV 3/2014)

8 An approved report is generally required for acquisition, property management, relocation assistance and record purposes. It is of critical importance to further Right of Way activity. It must be complete and reliable in all its contents. The report will be a summary of basic information and conclusions together with pertinent support. It shall contain information about the properties and general aspects of the entire project. Additional backup information such as detailed improvement descriptions and plans, additional photographs, bids, detailed cost studies, interview records, additional comparable data, utility relocation studies, etc., should be maintained until acquisition is complete and the files are no longer necessary for record, testimony, or RAP purposes Appraisal Report Not Required When the Region/District determines that the valuation problem is uncomplicated and the fair market value is estimated at $10,000 or less, based on a review of available data, a report is not necessary. The $10,000 amount includes severance damages but excludes any nonsubstantial construction contract work. Authority to waive the appraisal is provided for in Federal Regulation [49 CFR (c)(2)]. Authority to make this determination rests with the Region/District Right of Way Manager (Region/District R/W Mgr.), who may delegate it. The documentation required is the Waiver Valuation. (See Section ) The Waiver Valuation cannot be used as a basis for deposit when obtaining an Order for Possession Uniform Relocation Assistance and Acquisition Policies Acts Both the Federal and State Uniform Relocation Assistance and Real Property Acquisition Policies Acts contain basic requirements for the appraisal of real property for public project purposes. These basic requirements are quite similar, and therefore apply to all projects. Appraisals are to be prepared according to these requirements, which are intended to be consistent with the Uniform Standards of Professional Appraisal Practice (USPAP). 49 CFR 24.1, , , , and set forth these basic requirements Standards The appraiser will thoroughly investigate and consider every material fact regarding the market value of the appraised property. Every effort will be made to interview the property owners and to secure factual information on the subject property sales, costs, alterations, income and expense data, age, etc. The subject properties and comparable data shall be viewed in the field and all improvements to be appraised shall be carefully inspected. The appraiser should refrain from furnishing detailed information regarding valuation, time schedule or construction items. At the appraisal stage, such information is usually incomplete and subject to change Appraiser Qualifications The Associate Right of Way Agent is considered the staff appraiser for routine to complex eminent domain real property appraisals not involving Federally insured financial lending institutions. Staff appraisers (Associate Right of Way Agent) are not additionally required to be licensed by any other State agency having real property appraisal oversight. Ranges A and B Right of Way Agents are considered the staff appraiser when the work product is directly supervised by and cosigned by an Associate Right of Way Agent (REV 3/2014)

9 Jurisdictional Exception The USPAP Jurisdictional Exception Rule allows for deviation from the USPAP Rules and Standards where Federal and/or State laws or regulations are in conflict. The State appraiser can follow the requirements set forth by the Uniform Relocation Assistance and Acquisition Policies Act in the Code of Federal Regulations and the California Code of Civil Procedures and retain compliance with USPAP. Examples of conflict are: 1) The definition of Fair Market Value. USPAP states the most probable price and the California Code of Civil Procedure states the highest price. 2) USPAP states when analyzing public or private improvements, the appraiser must analyze the effect on value of such anticipated improvements to the extent they are reflected in the market. CFR prohibits including project influence in the determination of value. 3) USPAP states the appraiser analyze all transactions of the property prior to three (3) years of the Date of Value. CFR states the appraiser analyze all sales prior to five (5) years of the Date of Value Separation of Appraisal and Acquisition Functions The Department of Transportation (Department) maintains a separation of the appraisal and acquisition functions, except that, the same person can appraise and negotiate a parcel if total valuation, excluding nonsubstantial construction contract work, is $10,000 or less. This dollar limit also applies to revisions where the appraiser was previously assigned to negotiate the parcel. The valuation document can be either an appraisal or Waiver Valuation as discussed in above. When the same person prepares the appraisal and does the acquisition, the Certificate of Appraiser must be revised from the standard Certificate. It should contain a statement substantially as follows: That I understand that I may be assigned as the Acquisition Agent for one or more parcels contained in this report but this has not affected my professional judgment nor influenced my opinion of value. Members or candidates of professional appraisal organizations who are assigned to act in the dual capacity of appraiser and acquisition agent should check their organization s code of ethics for specific prohibitions and disclosure requirements Prerequisites for Preliminary Right of Way Right of Way Planning and Management is the lead right of way function concerning prerequisites for commencement of all preliminary engineering activities, preliminary right of way activities, and regular right of way activities. See Chapter 3. Preliminary Right of Way is defined as those Right of Way activities that occur after: A. The project is programmed or lump sum funded. (Activities are typically charged as Right of Way support to the project s Phase 2 expenditure authorization.) B. Budgeted spending has occurred. 1. The project is in the current approved Right of Way Capital Plan or in the proposed Right of Way Capital Plan for the budget year. 2. Other Entity Funding is secured. The source of funding is in accordance with the terms of a Cooperative Agreement with a Local Public Agency, if applicable (REV 3/2014)

10 The Preliminary Right of Way Activities are: 1. Ordering Title Reports. 2. Preparing Base Maps. 3. Preparing Appraisal Maps. 4. Conducting project-wide comparable sales searches once a preferred alternate is internally selected. In addition, the preferred alternate must be made public in some manner, e.g., newspaper announcement, distribution of the final environmental document, or the like, before the following activities can take place. 5. Assigning appraisers to specific parcels. 6. Contacting the property owners to commence appraisal activity (i.e., sending the Notice of Decision to Appraise). 7. Completing the appraisal. These prerequisites do not apply to hardship and protection appraisals. One of the main reasons that project appraisals should not normally be completed far in advance of the environmental clearance on regular right of way acquisition parcels is to avoid their being outdated before offers can be made. If the appraisal must be updated because of a delay in receipt of the environmental clearance, support required to produce the second appraisal is not eligible for federal participation. In addition, appraisals of partial acquisitions should not commence prior to the receipt of appraisal maps. Final environmental clearance is a prerequisite to commencing regular right of way acquisition. The exception to this rule is when early acquisition is approved. See the Early Acquisition Guidelines (Reference 3-EX-6). Appraisal support costs may or may not qualify for federal aid. PA&ED plus E-76 approval is the point at which parcel specific right of way support costs become eligible for federal aid on a federally eligible project Dual Report Requirements The District may determine that dual reports are needed to ensure the owner receives a fair market value offer. Duals should be considered for unusually large or complicated parcels or parcels exceeding $500,000 in value. This amount includes improvements pertaining to realty, severance damages, and substantial construction contract work. The following are items to consider in determining which parcels may require dual reports: There is a serious question as to highest and best use. Market data is inconclusive because of its scarcity and/or absence of established patterns and value conclusions must, therefore, be based primarily on opinion. There are substantial improvements not compatible with the highest and best use of the land. In other words, there is a high degree of economic obsolescence (REV 3/2014)

11 A significant portion of the appraised value is severance damages or there is a substantial question regarding damages or benefits. The value of the land is primarily on a development-analysis approach, or there is reliance on a specific plan of proposed development. Dual reports shall be separate, and fully independent in calculations, analysis and conclusions. This will give a better basis for determining market value and help ensure a sound offer. The appraisers and their Region/District supervisors are responsible for maintaining the fact, spirit and appearance of this independence. For dual report requirements pertaining to the direct sale of excess commercial property pursuant to S&H Code Section 118.1, refer to Excess Land Appraisals Donations Anticipated donations must first be appraised unless the following apply: A. The donation is initiated by the owner, and B. The owner, after being informed of the right to receive just compensation, provides the Region/District with a signed statement or letter waiving said right to receive just compensation and releasing the State from its obligation to appraise the property. If an owner provides a signed statement or letter waiving just compensation but requesting an appraisal, the Notice of Decision to Appraise is not required. In the past, IRS has indicated that staff appraisers may not be used to appraise donations in excess of $5,000 which are to be claimed as charitable contributions for Federal tax purposes. The owner should be advised to check with a tax consultant, IRS and/or the Franchise Tax Board if this or other questions of tax implications arise. Donations may be used as matching fund credit to a Local Agency. This can apply on selected route segments where a local agency is required to match State right of way protection expenditures. The donation must be appraised to establish the contributory value to be credited to the local agency Credit Toward State s Matching Share Section 146(a) of the Surface Transportation and Uniform Relocation Assistance Act of 1987 provides that the fair market value of land lawfully donated after April 2, 1987, and incorporated into the project, may be used as credit toward the State s matching share for a Federal-aid highway project. No credit can be allowed for any amount negotiated with the owner which exceeds the appraised fair market value. The credit applies only to bona fide donations. It does not apply to dedications. The fair market value shall be established by an appraisal made in conformity with the provisions of 49 CFR and , subject to the following conditions: A. Increases and decreases in the value of the donated property caused by the project are to be excluded. B. The appraisal shall not reflect damages or benefits to remaining property (REV 3/2014)

12 C. The fair market value shall be established as of the date the donation becomes effective or when equitable title vests in the State, whichever is earlier. Donated land must be incorporated into the project to be eligible for credit purposes. Donations made by a Federal, or a State government agency are not eligible for project credit purposes. A contribution by a unit of local government of real property which is offered for credit, in connection with a project eligible for assistance under this title, shall be credited against the State share of the project at fair market value of the real property. Property may also be presented for project use with the understanding that no credit for its use is sought. Right of Way shall assure that the acquisition satisfied the conditions in 23 CFR (b) and the documentation justifies the amount of the credit. All appraisals involving donations for credit to State matching funds must otherwise meet the same standards as normal acquisition appraisals. See Chapter 8 for further information related to Acquisition Dedications Legal considerations concerning the appraisal of property having future street requirements as of the date of value are summarized in this Manual section. Legal considerations are not to be confused with factual determinations which are to be made in every instance by the appraiser. The problem of appraising property with future street requirements arises where the property is located in such manner that in order to comply with the master plan of streets or the master plan of zoning, additional street areas will be required to be dedicated and improved in the reasonable near future as of the date of valuation for the purposes of the appraisal. These properties generally fall into four categories: A. Those already improved to their highest and best use. The property that is already enjoying the highest and best use and the street requirement, while considered, must be assumed to not affect valuation. The local governmental body could apply no valid pressure on the owner to force a dedication in view of the fact that he is already enjoying the highest and best use of his property. If the street were to be widened, the local governing body would be required to condemn the necessary area. Therefore, this property should be paid for at its full market value under its highest and best use. B. Those already zoned to their highest and best use. Generally, a dedication requirement arises as a condition for a change of zone. If that is the only requirement of the local governing body, then the conclusions under Category A would be followed. However, a significant number of local governmental entities have adopted building permit requirements, as opposed to zone change requirements, which impose dedication requirements as a condition for obtaining a building permit. If the property is found in such a political entity, then the conclusion under Category C would be followed (REV 3/2014)

13 C. Those not zoned or improved to their highest and best use. Since the required street area would have to be dedicated before the property could achieve its zoning or building permit for highest and best use, the area so required would be of only nominal value. In this instance, the value of the area to be dedicated is reflected in the higher unit value of the remaining property which is generated by such dedication. It follows then that the average unit value theory could not apply and the nominal value theory would be used. In any event, if the appraiser finds that by reason of the local agency s governing provisions the land probably will never be used for street purposes, he should take that into consideration in forming his opinion of value. D. Those properties which would fall within Category C, except for the fact that there is an interim use of some significant time period before the ultimate highest and best use ripens. The area to be dedicated would have the same unit value as generated upon either the whole property or the remaining property by the interim use, assuming, of course, that the time of the interim use and the value of the interim use were of such significance as to affect the appraiser s ultimate conclusions of value. In the same category where the parcel has already ripened to a higher and better use but is improved with a lesser though significant and valuable use which would fall within the definition of an interim use, the determination of value in this case would, of course, be an appraisal problem. In all of these instances, the future requirement of street dedication with the ultimate improvement of the street for city or county standards must be considered by the appraiser Notice of Decision to Appraise The appraiser must advise the property owner of the State s decision to appraise the property. The notice must be in writing and cover the following: A. A specific area is being considered for a particular public use, i.e., the project; B. The owner s property is located within the project area; and C. All or a portion of the owner s property (which should be generally described) may be acquired for public use. The letter will offer the owner (or the owner s representative) the opportunity to accompany the appraiser on an inspection of the property. It will give reasonable advance notice. There is no mandatory format for the notice; however, see Exhibit 7-EX-17 for a suggested format. Enclosed with the letter to the owner will be the following: A. Written explanation of the Department s land-acquisition procedures. The booklet Your Property, Your Transportation Project will satisfy this requirement; and (REV 3/2014)

14 B. A Title VI brochure and other required items listed in R/W Manual Chapter 2, Section The Notice and acquisition procedure explanations may be modified as necessary when doing contract appraisal work for other agencies, when the property owner is a governmental agency, etc. Governmental agencies are entitled to written notice, etc., just like a private property owner; however, judgment should be used as to the need to send complete notices and packages to the same agency time after time Parcel Diary The appraiser will initiate the Parcel Diary Form RW 7-1 for each ownership. The appraiser shall include all required information covered in the instructions. The form should be initiated by an appropriate entry indicating the date the parcel is assigned for purposes of preparing an appraisal, together with entries documenting parcel data. The parcel diary is an internal document to be forwarded with the appraisal for review and kept in the parcel file for documentation Responsibility for Providing RAP Information The Appraisal Branch is responsible for the following: A. The Appraiser, when asked, shall give accurate, basic relocation information to all potential displaced persons who are encountered during the appraisal process. B. Pursuant to Federal regulations, the RAP Branch is required to advise potential displacees of their possible RAP benefits as soon as the occupants are identified. The Code of Federal Regulations also requires each business to be interviewed by the RAP Agent prior to the initiation of negotiations. The appraiser is usually the first contact a potential displaced person has with the Department. When an appraisal (primary or alternate) indicates a displacement of people, businesses, and/or personal property, the appraiser is to complete the Parcel Occupancy Data Form RW 7-2 at the time of the first meeting or contact with the owner. This is true whether the displacement would result from the taking of right of way or from the effect of the taking on the remainder. Note that a displacement may occur even though there are no severance damages to the real property (a consequential displacement). This form may be modified to cover a residential or business only displacement. The RAP Agent may accompany the appraiser during the inspection of the subject. The Parcel Occupancy Data Form is an internal document; as such, it does not go forward with the appraisal. The appraiser is to forward the Parcel Occupancy Data Form to the Region/District RAP Branch at the earliest possible date and note in the Parcel Diary the date it was forwarded. The RAP Branch will then provide general relocation assistance information to all potential displacees listed. The RAP Branch will send the Title VI (Civil Rights) Survey form and a Title VI brochure to all known tenants. The appraiser must immediately notify the appropriate branch (RAP, Acquisition, etc.) and make a parcel diary entry, of information which may affect the displaced person s eligibility for RAP benefits (i.e., the knowledge that an occupant intends to move prior to the date of the first written offer) (REV 3/2014)

15 C. Where the appraisal of commercial, industrial, or other properties includes machinery, equipment, fixtures, and/or improvements pertaining to the realty, the appraiser shall, as part of the appraisal report: 1. Itemize for identification: machinery, equipment, and fixtures which are considered realty, as well as those items determined to be Improvements Pertaining to the Realty (see Sec of the Eminent Domain Law). RAP will not pay for the relocation of realty. 2. To the extent possible, determine the ownership or claims to ownership of the listed items as between the fee owner and tenants or lessees. D. If the primary or alternate appraisal indicates occupied improvements will be acquired or may be acquired as uneconomic remnants (in the market or to the owner), then the State is usually obligated to provide relocation assistance to the habitants (residential or business). In questionable situations, the appraiser shall discuss the situation with the Region/District s RAP Branch. E. Actual and Economic Rental Rates (see Section , Rental Rates ) - Economic rental rates for all improved properties will be shown in the fair market value appraisal Legal Opinions All appraisals shall consider legal problems involved in the appraisal procedure. Care must be exercised to see they are clearly defined and resolved. The Region/District should consult with the Legal Division, normally through HQ R/W, when such problems are first encountered. The Region/District may request a legal opinion directly from a local office of the Legal Division generally where an interpretation of a condition or situation is involved. Any legal opinions involved in the appraisal process shall be documented in the report. It may be desirable to secure legal opinions on such questions as benefits, compensable damages, extent of larger parcel, personalty versus realty, valuation of dedications, etc. Strictly adhering to this policy will result in minimum loss of time for Region/District personnel and the State s attorneys Responsibility for Preparation Appraisals will only be made by qualified appraisers. Field work and composition will be accomplished by or under the direct supervision of a Right of Way Agent of at least Associate grade. The agent assisting in the preparation will, at the Region/Districts option, sign the Title Page and/or a Certificate of Appraiser as discussed in Section , E. The appraiser shall personally conduct the inspection of the subject and comparable properties Appraisal Review All appraisals are reviewed to: 1. Ensure that the appraiser s documentation, including valuation data and the analysis of that data, demonstrates the soundness of the appraiser s opinion of value and that the appraisal report conforms to the requirements of this Chapter and established appraisal practices (REV 3/2014)

16 2. Ensure that the appraised amount is equitable and represents a proper amount for the offer of just compensation in accordance with the Uniform Relocation Assistance and Real Property Acquisitions Policies Act of 1970 and Government Code 7260 et seq. Both the cumulative review and review appraiser process are recognized and acceptable methods for determining the adequacy and appropriateness of the appraisal report being reviewed to ensure that it is based on sound appraisal theory and contains appropriate documentation to support the appraisers conclusions. Both methods will also accomplish the requirement that the approved appraisal represents the fair market value of the property and represents a proper amount for the offer of just compensation. Definitions Administrative Review - A review performed as a due diligence function in the context of making a business decision. The review will consist of ensuring the appraisal contains the proper forms, is in proper sequence, and the arithmetic is correct. The administrative review is usually less detailed than a technical review, and the administrative reviewer does not render an opinion as to adequacy of the opinion of value. Technical Review - Review performed for the purpose of forming an opinion as to whether the analyses, opinions and conclusions in the appraisal report under review are appropriate and reasonable and that the appraisal complies with the Uniform Act, Government Code 7260 et seq., the requirements of this Chapter, and established appraisal practices. The technical reviewer, both the review appraiser and the cumulative review appraiser, must have the necessary appraisal knowledge, experience and formal education to satisfy the requirements of 49 CFR (d). The qualifications of the review appraiser and cumulative review appraiser must be consistent with the scope of work for the appraisal assignment. The qualifications must meet the appraisal related criteria of the Senior Right of Way Agent classification (as defined by the California State Personnel Board and internal district duty statements) and must be based on formal appraisal education such as the courses listed on the Division of Right of Way Recommended Course List Cumulative Review Concept The cumulative review process used by the Department requires that the appraiser s supervising senior will conduct a technical review and approve or recommend for approval the appraisal report. If the supervising senior is not authorized to approve the appraisal report, it will be submitted for approval to the Supervising Right of Way Agent (Branch Chief), Region/District Right of Way Manager, or HQ R/W in accordance with the current delegations. A flow chart outlining the typical steps in the cumulative review process is shown as Table I in Section There are limited instances where the Review Appraiser concept and its implementation are available to the staff reviewing appraiser. See Section Review Appraiser Concept The review appraiser is a unique position whose responsibility includes ensuring that appraisals under review are based on sound appraisal theory and contain appropriate documentation to support the conclusion of fair market value consistent with requirements of As part of this responsibility, the review appraiser can reject an appraisal that does not meet the test of an adequate appraisal product and if unable to resolve the differences with the appraiser, require a new appraisal be prepared. Consistent with current delegations, the review appraiser will conduct a technical review and will have the authority to approve all appraisals over $10, (REV 3/2014)

17 Since the review appraiser is the only individual reviewing and approving the appraisal report, it is imperative that the review appraiser have a solid appraisal background. This will include education and experience in preparing a wide variety of appraisals including part-take appraisals with severance damages and/or benefits analysis. At a minimum, the review appraiser should be a Senior Right of Way Agent and report directly to the Region/District Right of Way Manager. In limited instances, this concept and its implementation are available to the cumulative review appraiser. This process may be used when an independent fee appraiser is employed to prepare a single-acquisition report or, in rare instances, on a staff appraisal. This situation may also be encountered when a local agency hires a fee appraiser, and the Department provides appraisal review and approval services. When the review appraiser finds the report lacking in content, support, reasoning, or conclusion, the reviewer may elect to assume the capacity of review appraiser and supplement the areas considered lacking, including modifying the appraised value. This would be accomplished by written memorandum clearly delineating the areas in question and providing full support and documentation for the reviewer s conclusions. Approval requirements will be in accordance with existing delegations Review Appraiser Process A flow chart outlining the typical steps in the review appraisal process is shown as Table II in Section A. Roles and Responsibilities of A Review Appraiser. To better define the role and responsibilities of a review appraiser, a Review Appraiser Task/Duties is included as Table III in Section While some of the tasks may be discretionary, the table provides the basis for the expectations of the duties to be performed by a review appraiser. B. Approval Certificate In conjunction with the approval of the appraisal, the review appraiser will sign the Review Appraiser Certificate, Exhibit 7-EX-24D, and Appraisal Title Page - Review Appraiser, Exhibit 7-EX-21B. C. Dual Report Process The current process for dual reports as stated in remains the same. The review appraiser duties regarding dual reports are as follows: Review and concur with all requests for waiver of dual reports prior to submitting the request to the Region/District Right of Way Manager (REV 3/2014)

18 When dual reports are prepared, the review appraiser will perform a technical review of both reports and recommend both reports to HQ R/W for approval. The review appraiser s recommending approval of both reports is not a recommendation of two separate fair market values. Rather it is an indication that both reports are based on sound appraisal theory and contain appropriate documentation to support the appraisers conclusions. See Section for an additional discussion on resolving significant judgmental differences between the two reports. Only the approved appraisal will be provided to the Grantor. The second report will be stamped Reviewed for Documentation and kept in the office files. D. Role of Supervising Senior in the Review Appraiser Concept Although the supervising senior will not be approving and/or recommending for approval the appraisals produced by their unit, they need to have a good understanding of appraisal theory and practice. In this context, the supervising senior will: Make appraisal assignments. Track progress of appraisals. Provide staff the necessary guidance and training. Assure consistency in application of data and valuations, particularly between different appraisers who are preparing appraisals in the same area. Make an administrative review of the appraisal for accuracy, adequacy of documentation, and consistency in the application of data and valuation prior to submitting the appraisal to the review appraiser for approval. This administrative review is not considered a review for purposes of approving the appraised value nor is it a first step in the cumulative review process. Rather it is a review for form and content to ensure that the appraisal product is complete and contains appropriate documentation to support the appraiser s opinion. Upon completion of the administrative review, the supervising senior will complete the Appraisal Checklist, Exhibit 7-EX-22, and sign a certificate indicating an administrative review of the appraisal for form and content has been completed. Exhibit 7-EX-23 is a suggested format for the transmittal letter. Assist the appraisers in responding to the Review Appraiser s concerns Minor Deficiencies Minor deficiencies are deficiencies that do not affect the value, but should be corrected prior to approval. They include: 1. Mathematical errors not affecting the value conclusion 2. Project identification data 3. Parcel numbers 4. Typographical errors which could lead the reader to an erroneous conclusion. Location, zoning, or present use of either the subject property or of comparable sales, if not a major deficiency (i.e., one which affects value) 5. Other minor deficiencies not affecting value In the case of minor deficiencies in the appraisal report, the review appraiser can either request the appraiser correct the deficiencies or make the changes to the report. Any changes made by the review appraiser should be initialed and dated and the appraiser notified of the changes (REV 3/2014)

19 Major Deficiencies Major deficiencies are deficiencies that affect the value conclusion and, unless corrected, will result in a rejection of the appraisal report. They include: 1. Highest and best use analysis 2. Insufficient analysis, reasoning, and erroneous conclusions 3. Errors in valuation 4. Analysis that mislead the user of the report 5. Nonadherence to the requirements of this Chapter 6. Other deficiencies that will cause the report to be rejected When the review appraiser finds that a report contains major deficiencies, the review appraiser should immediately notify the appraiser and supervising senior, preferably in writing, stating the deficiencies and/or need for clarification. If the review appraiser is unable to resolve the deficiencies, the review appraiser will reject the appraisal and request a new appraisal or prepare a Reviewer s Appraisal Report. A. Appraisal Rejection When an appraisal is rejected, the review appraiser prepares a memorandum to the Supervising Right of Way Agent (Appraisal Branch Chief) with a copy to the Region/District Right of Way Manager and supervising senior stating the reasons for the rejection, the major areas of disagreement, and efforts taken to obtain an acceptable report. The supervising senior will then make arrangements to have a new appraisal prepared. B. Reviewer s Appraisal Report If it is not practical to obtain a new appraisal, the review appraiser, after consulting with the Supervising Right of Way Agent (Appraisal Branch Chief) and Region/District Right of Way Manager, may develop appraisal documentation to correct the rejected report for the parcel in question. In arriving at their own estimate of value, the review appraiser may use valid market data available, including data contained in any appraisals received for review. The review appraiser must personally verify any data obtained on their own initiative and provide written analyses of the data, plus reasoned justification or explanation supporting their conclusions consistent with the requirements of this chapter and established appraisal practices. When the review appraiser makes changes to an existing appraisal report to cure a deficiency which results in the reviewer s own opinion of value, the entire appraisal report is considered to be that of the review appraiser and no longer that of the original appraiser Approval Authority Regardless whether the Region/District utilizes the cumulative review or review appraisal process, approval of the appraisal products will be in accordance with the existing Delegations as discussed in the Policy Chapter in this Manual and shown in the Exhibit Section. Any approvals not specifically delegated are retained in HQ R/W. When appropriate, the Region/District can submit otherwise Region/District-approved appraisals to HQ R/W. This includes Local Agency Contract appraisals when acquisition is to be performed by the Region/District (REV 3/2014)

20 Criteria for Use of Independent Fee Appraisers When the Department uses an Independent Fee Appraiser to prepare a regular acquisition, condemnation, excess land or airspace appraisal, the Independent must have a Certified General Real Estate Appraiser license issued in accordance with Title XI of Reform, Recovery and Enforcement Act of 1989 and the State of California Real Estate Appraiser Regulations Title 10, Division 6.5. This requirement also applies to all Federally-aided local streets and roads projects and all special funded projects Report Processing and Records The original appraisal shall be held by the Region/District as their Record of Appraisals for the proper retention period. A copy of the approved appraisal is not required to be sent to HQ R/W. This includes Local Assistance contract appraisals when acquisition is to be performed by the Region/District. 1. Appraisals may contain multiple parcels in a single ownership for both HQ R/W and Region/District approval. Waiver Valuations may also contain multiple parcels in a single supplement. In these cases, parcels will be arranged in the report in numerical order regardless of approval authority. 2. The Title Page will indicate whether HQ R/W approved or Region/District approved. 3. If used, a Parcel Summary Sheet may be kept in the parcel file for documentation. 4. Internal documents including the Certificate of Sufficiency (COS), the Hazardous Materials Disclosure Document (HMDD), the Parcel Diary, the Parcel Occupancy Data Sheet, the Parcel Summary Page, and the Excess Property Inventory Valuation (VTA) are not a part of the appraisal per se. As such, they must go forward with the appraisal for review and also with the copy that goes to Acquisition. The internal documents are then retained in the District s file. All internal documents shall be removed prior to providing a copy of the appraisal to the Grantor Memo of Transmittal A memo of transmittal is not required for routine submission of Appraisal Reports. A memo is required on resubmission of unapproved reports or the submission of corrected or revised appraisal pages. In these cases, the memo will briefly summarize the reason for resubmission and corrections made Tables Table I - Cumulative Review Process For $10,000 and Over Table II - Review Appraiser Process $10,001 to $1,000,000 Table III - Review Appraiser Task/Duties (REV 3/2014)

21 Table I CUMULATIVE REVIEW PROCESS FOR $10,000 AND OVER Senior Assigns Appraisal Assoc. R/W Agent Prepares Appraisal Assoc. Agent Submits (draft) Appraisal report to Sr. Sr. conducts field review of subject property & comparable data Concerns Discussion of differences & concerns Resolution No Remove Appraiser & assign to another Appraiser No No Is Appraisal acceptable Submitted for 2nd level review for approval by Region/District R/W Mgr. Sr. reviews appraisal (sign) & recommends for approval Appraisal is corrected Yes No Dual Is Appraisal Acceptable Does report require HQ approval Yes No Approved at Region/District level District Acquisition Branch receives Appraisal Approval certificate returned to Region/District (REV 3/2014)

22 Assoc. R/W Agent Prepares Appraisal Start Senior (Supv) Assigns Appraisal Table II REVIEW APPRAISER PROCESS $10,001 to $1,000,000 Is Appraisal Acceptable Yes Corrections needed Assoc. Agent submits Appraisal to Sr. (Supv.) for Admin. Review/ checklist Sr. (Supv.) submits App. to Reviewer Reviewer Conduct Field/Office Review No Major Deficiences * Return to Sr. (Supv.) for correction Report Corrected Yes Approved Return to Sr. (Supv.) for correction Minor Deficiences No Discuss with R/W Mgr. & Advise Sr. (Supv.) of discussion Option 1 Option 2 Report Corrected No Corrected by Review Appraiser No Yes Yes Approved Rejection of Report Reviewer Appraiser prepares own report Approved Recommend new Appraiser District Acquisition Branch receives approved Appraisal (REV 3/2014)